[China was once the world’s largest maker of Bitcoin, though rising government pressure has forced many of those who make the cryptocurrency, known as miners, to other countries. Still, a number of Bitcoin miners could remain, especially if local governments ignore the instructions and find a way to prop up local producers, say people in the business.]
By
Cao Li
 |
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A Bitcoin operation in
the Chinese region of Inner Mongolia. China once embraced
digital currencies but
has become increasingly skeptical about them.
Credit Giulia Marchi for
The New York Times
|
HONG
KONG — China is planning new
steps that could put a stop to making Bitcoin there, a move that could cut off
one of the world’s largest sources of the popular but unstable cryptocurrency.
The National Development and Reform
Commission, China’s top economic planning body, this week added cryptocurrency
mining to a list of about 450 industries that it proposes to eliminate. If the
move is finalized, local governments in China would be prohibited from
supporting makers of Bitcoin and other digital currencies through subsidies or
other benefits.
The commission said it would seek public
comment until May 7 before making a final decision.
China was once the world’s largest maker of
Bitcoin, though rising government pressure has forced many of those who make
the cryptocurrency, known as miners, to other countries. Still, a number of
Bitcoin miners could remain, especially if local governments ignore the
instructions and find a way to prop up local producers, say people in the
business.
“It is categorized as an industry that is not
encouraged or allowed to expand, but it is not a ban,” said Zhao Qianjie, a
former executive at BTCChina, which was China’s first cryptocurrency exchange.
Instead, Mr. Zhao said, some producers may
learn to live without subsidies and benefits like discounted electricity. “The
change will be the mining cost will rise,” said Mr. Zhao, who still owns a
Bitcoin mine in China’s northern region of Inner Mongolia.
Bitcoin miners use computers to crunch the
mathematical formulas that create the basis for the currency. The business can
be quite profitable, especially when Bitcoin prices are soaring, but the
process requires considerable amounts of electricity. Prices of the currency
move up and down considerably and are currently above $5,000, according to
Blockchain, a cryptocurrency firm.
China initially embraced Bitcoin and saw
local miners as the potential basis for a new industry focused on digital
currencies. China also has plenty of power, thanks to its extensively built-out
electricity system and the closure of a growing number of heavy industry
factories as the economy matures. At one point, China accounted for roughly
two-thirds of all Bitcoin produced.
But China keeps a tight grip over how much
money flows in and out of its borders, and cryptocurrencies — which are traded
on decentralized computer networks and allow people to make transactions
anonymously — threatened to undermine those capital controls.
Cryptocurrencies can also be used to
circumvent laws to buy illegal goods, and Chinese officials were also spooked
by the possibility that the wildly fluctuating prices could leave investors
with big losses and lead to civil unrest.
The Chinese authorities began to ratchet up
pressure on Bitcoin miners. In 2017, China ordered cryptocurrency exchanges to
close. It has also banned initial coin offerings, a method by which start-ups
or online projects can raise funds by issuing cryptocurrency. Many miners began
to hide or flee to places with friendlier laws or abundant electricity,
including the United States.
“All the policies have created fear,” said
Chandler Guo, who owned Bitcoin mines in China but moved to Silicon Valley in
2016. “Many have moved abroad.”
Still, China remains a significant force in
the Bitcoin world. Based on different estimates, between 40 percent and 70
percent of the world’s mining power is still in China.
The National Development and Reform
Commission’s proposal is the first time a central government body has publicly
announced a restrictive policy on Bitcoin mining, and it could make it
difficult for miners to get loans to expand, said Wu Huiyao, president of the
Center for China and Globalization, a research organization in Beijing.
“Local governments won’t act against it, so
it will be more difficult for them to be approved or receive loans,” Mr. Wu
said.
Miners said that while the crackdown on
cryptocurrency has driven some miners abroad, the total cost of mining is still
lower in China, where most of the mining machines are produced.
Yu Wei, a former executive with Bitmain,
which makes products for mining cryptocurrencies — and who owns mines in
Xinjiang and Yunnan Province in China, as well as in Central Asia — said the
move could benefit the industry in the long run. “That means more miners will
move abroad,” he said. “That will be good for decentralization of
cryptocurrency.”
